The causal effect of retirement on health: New evidence from Australian pension reform

•The causal effect of retirement on health is assessed.•Major reform to the Age Pension provides exogenous variation in retirement status.•The reform caused a significant decline in retirement among Australian women.•Retirement is found to have a positive impact on health.•The results are common to objective and subjective health measures.

The causal effect of retirement on health is studied using the Australian 1993 Age Pension reform to isolate exogenous variation in retirement status. Using instrumental variable methods we find that retirement has a positive impact on subjective and objective measures of health.