Medieval Dynasty Villagers Happiness Guide

You have to build a food storage building and keep it stocked with food. You have to build a material storage building and keep it stocked with wood. That gives every villager a happiness of 50%. If you don´t have either of these buildings or supplies, happiness dropps fast until villagers leave (after 2-3 days).

Villagers can only consume food and wood when they are in the storage buildings. They cannot take them out of boxes or lying around.
It is not necessary to assign workers to the storage buildings as shop keepers. Right now shop keepers don´t do any work.
Your wife counts as a villager, too. She, too, needs the storage buildings to keep her supplied and happy.50% happiness is enough to make your villagers stay and work, so there is no need to raise villager happiness further. Productivity seems to depend on skill level, not on happiness. Still, villagers can become more happy than that and it´s fun to see smiling faces.

Upgrading houses with clay timber (crafted in barn from clay and straw) raises happiness of all inhabitants by 3%. If the house needs repair, happiness drops by 1%.

If you assign one man and one woman to a house, after a while they will start liking each other and their happiness rises by 5%.
Then the woman has a baby and both parents get an additional 5% happiness.
(Your wife gets the same 5% bonus when marrying you plus 5% when having a child.)
Houses have room for 4 people, so villagers can have a second child and become 5% more happy again.
Added up, that´s plus 15% happiness for parents of 2 children.
(Don´t know about grandchildren yet.)

The tier 3 tavern has a barrel, but crafting is not yet implemented.