ABSTRACT: This article analyzes the relationship between aid and the mobilization of domestic public resources. The aim is to assess whether aid incites recipient countries to reduce the mobilization of tax revenues and domestic borrowing; in other words, is there a crowding out effect of public resources by aid. The analysis uses panel data from 45 sub-Saharan African countries that were aid recipients over the period of 1970 to 2014. The results of the estimates suggest that aid discourages the mobilization of fiscal resources in these countries but encourages the use of domestic borrowing to finance public budgets.

KEYWORDS -Aid, Domestic borrowing, Domestic resources, Net government claims,Tax revenues