Happiness, sanctions, and institutional quality in developing countries

There is a gap in the literature on how institutional quality influences happiness in sanctioned developing countries. To fill this gap, we estimate a set of dynamic panel data models for 56 developing countries from 2005 to 2022 using a system-generalised method of moments. Our approach allows us to examine the interaction effect between institutions and sanctions on happiness. We find that lower political risks, more democratic accountability, better socioeconomic conditions, improved bureaucracy quality, less corruption, and fewer ethnic tensions reduce the harmful effect of sanctions on happiness. Furthermore, military intervention in politics worsens the adverse effects of sanctions. We find that a robust social support system increases happiness during sanctions. Inflation and access to the internet decrease happiness. As a robustness check, estimating the model using a comprehensive institutional quality index comprising political, financial, and economic sub-indicators confirms our findings. These findings hold implications for policymakers in developing economies.