Markov switching models for happiness during a pandemic: The New-Zealand experience

This paper estimates Markov switching models with daily happiness (GNH) data from New Zealand for a period inclusive of the Covid-19 global health pandemic. This helps us understand the dynamics of happiness due to an external shock and provides valuable information about its future evolution. Furthermore, we determine the probabilities to transition between states of happiness and estimate the duration in these states. In addition, as maximising happiness is a policy priority, we determine the factors that increase happiness, especially during the pandemic to ensure rapid restoration of happiness levels post the Covid-19 shock. The results show New Zealand is currently in an unhappy state which is lasting longer than predicted. To increase the happiness levels to pre-pandemic levels, policymakers could allow free mobility, create economic stimuli, and allow international travel between New Zealand and low-risk Covid-19 countries.