The effect of institutional quality on national wealth: an examination using multiple imputation method

Various indicators have been developed to assess the sustainability of countries. However, it remains theoretically and practically unclear whether it is possible to include institutions as an element of the sustainability index. One of the main challenges is the substantial problem of missing data. Recent studies have shed light on the potential means to improve data collection and to construct better indicators for the quality of institutions and their use in theories of sustainability. However, the special nature of institutions and the time-trend effect make it difficult to develop an appropriate selection strategy, although a variety of imputation methods have nonetheless been developed in this field. This study addresses this problem by including variables that might theoretically be considered in a multiple imputation framework. We construct a panel dataset that covers approximately 190 countries for the 1980–2010 period. Based on this complete imputed dataset, we investigate the effects of institutions on the change in comprehensive wealth in a country, which is adjusted net savings, using the instrumental variable method. We also suggest a strategy for including institutional indicators in post-2015 sustainability index design.