Financial Crisis and Governance in Developing Countries: Socio-economic Issues and Perspectives

The economic crisis had diverse socio-economic effects, particularly in developing countries. Added to the bad political and economic governance, these effects have made the social climate very fragile. So, in several countries, this situation has caused major social movements which have changed the political regime in some cases (Tunisia, Egypt, Libya and Yemen). Through these movements, these societies aim to establish law-governed states. Theoretically, under good governance development should flourish. In this paper, we analyze the socioeconomic effects of the crisis in several regions of developing countries. Then, we present a review of literature on governance and development. The last section is devoted to an empirical study using panel data. The empirical study covers a sample of 51 developing countries during the period 1980-2009 (yearly data, T=30). The main results show that the contribution of good governance to growth is significantly positive. Moreover, it seems that institutions that promote political and civil freedom enhance the contribution of Foreign Direct Investment (FDI) to growth. However, it is important to mention that these contributions are conditioned by the social endowment of human capital. The last seems to help to benefit, especially in the revolutionary new countries, from the new growth opportunities.