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