The Effect of Good Governance on the Flow of Foreign Direct Investment in Selected Developing Countries

This study discusses the effect of variables related to indicators of good governance, income, government consumption expenditure, human resource development and access to natural resources on the flow of foreign direct investment. To achieve this purpose, a synthetic indicator of good governance, including the variables of the right to protest and response, non-violent political stability, government effectiveness, regulatory quality, rule of law and control of corruption were analyzed, for 9 selected developing countries during the period 2002 to 2012. An econometric technique to estimate the effects of variables in this paper was panel co-integration with the approach off generalized least squares method (GLS). The results showed positive effect of synthetic indicator of good governance, income, human resource development and rate of access to natural resources and the negative impact of government consumption expenditure on the flow of foreign direct investment.

Keywords:

Good Governance , Foreign Direct Investment , panel cointegration techniques