Integration or Isolation?

Abstract

This paper examines the causal impact of retirement on social capital using nationally representative Australian panel data. Exploiting the eligibility age for the Age Pension, we find that retirement significantly enhances social capital by increasing social connectedness and community involvement. These gains improve physical and mental health, with effects comparable to those of physical activity. However, older individuals’ perceptions of social relationships remain unchanged. Our findings highlight a key policy tradeoff: while raising the retirement age may boost labor force participation, it may reduce opportunities for meaningful social engagement and, in turn, undermine the health of older adults.