Consumers’ Beliefs about the Effects of Trade

Consumers are often skeptical about purchasing foreign products and many voters are resistant to economic globalization. To better understand the factors underlying these trends, we consider consumers’ intuitive understanding of international trade. We find that consumers are intuitive mercantilists — they equate wealth with currency, resulting in a number of biased beliefs relative to economists’ prescriptions. Consumers believe that exports are beneficial while imports are harmful and, therefore, immoral (Study 1). These beliefs can be greatly reduced by framing transactions in a way that emphasizes the equality of currency flows across countries, but not by other frames which emphasize the efficiency of international trade (Study 2). These mercantilist beliefs also infect consumers’ own willingness to purchase foreign products, particularly from developing countries, because consumers incorporate the moral cost of imports into their willingness-to-pay (Study 3). These results have implications both for marketers of foreign products and for policymakers who wish to capture the economic benefits of trade.