Should Our Concern Be the Gift Horse Or the Ideological Bull? A Critical Economic Assessment of "Looking the Gift Horse in the Mouth, the Impact of Federal Transfers on Atlantic Canada"

From the Introduction to the Summary: In November 1996, the Atlantic Institute of Market Studies released a study entitled "Looking a Gift Horse in the Mouth: The Impact of Federal Transfers on Atlantic Canada" authored by Fred McMahon ... which purports to demonstrate empirically that federal spending in Atlantic Canada has affected the region by reducing indigenous economic activity dollar for dollar ... We shall take issue here with several key aspects of McMahon's analysis, our principal concern being his failure to subject his various hypotheses to appropriate econometric testing. Even using his data and methodology, none of his fundamental hypotheses stand up to such testing. This goes well beyond the naive and simplistic discussion of causality incorporated into an appendix to his document. Rather, it points to a fundamental shortcoming in his analysis that is unacceptable among professional economists.