Do Made in USA Claims Matter?

70 Pages Posted: 24 Oct 2019 Last revised: 17 Nov 2020

See all articles by Xinyao Kong

Xinyao Kong

University of Chicago - Booth School of Business

Anita Rao

University of Chicago - Booth School of Business

Date Written: September 24, 2020

Abstract

Firms often display product information on their front-of-package labels, with some firms going as far as to make deceptive claims. We study the impact of the “Made in USA” claim - a disclosure not legally required on consumer-packaged goods and yet a claim highlighted by many firms, sometimes deceptively, - on consumer demand. Leveraging the FTC’s investigation of four brands that resulted in removal of the claim from product packages, we study the impact such removal had on sales. We find a decline in demand following the removal of the “Made in USA” claim. Second, to ensure complete exogeneous variation, we conduct a field experiment on eBay, where we run over 900 auctions, varying only whether or not a product contains this country-of-origin information. We find that while products with the Made in USA claim have a slightly higher chance of drawing a zero valuation, such products obtain a 44% higher willingness-to-pay conditional on a positive valuation. However, this increased valuation is insufficient to economically justify firm relocation efforts. Auction transactions prices, on the other hand, are significantly and 28% higher with the claim suggesting resellers and auctioneers have incentives to display the claim. The experiments alongside observational data allow us to rationalize firms’ incentives in making deceptive country-of-origin claims.

Keywords: Field Experiments, Natural Experiments, Deceptive Advertising, Country-of-origin, FTC, Public Policy

Suggested Citation

Kong, Xinyao and Rao, Anita, Do Made in USA Claims Matter? (September 24, 2020). University of Chicago, Becker Friedman Institute for Economics Working Paper No. 2019-138, Available at SSRN: https://ssrn.com/abstract=3468543 or http://dx.doi.org/10.2139/ssrn.3468543

Xinyao Kong

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Anita Rao (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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