3 The social protection system in Cyprus: Recent initiatives and labour market implications  Louis N. Christofides* ,a and Christos Koutsampelas b a University of Cyprus and University of Guelph IZA and CESifo b University of Peloponnese Abstract This paper reviews the structure of the Social Protection System (SPS) in Cyprus, as well as the amounts spent per annum, in total and for each of the various functions it supports. We delve further into the functions and policies that most immediately relate to the labour market, paying particular attention to the support of the unemployed, those in financial need, and those who are sick and temporarily or permanently disabled. Important recent reforms are examined in depth, especially the Guaranteed Minimum Income programme and its connection with the pre-existing system of unemployment insurance. Lacking access to publicly available micro data on the use of various facets of the SPS, we consider ideas that could improve its fairness, effectiveness and sustainability, so that it can continue to support individuals in real need. Keywords: System of social protection, reforms, evaluation, the labour market. 1. Introduction Most market-oriented countries operate social protection systems (SPSs) designed to take care of important needs of their population, including the needs of those who are unemployed, financially disadvantaged, or temporarily/permanently sick or disabled. An important concern is always that these systems be sustainable, a quality that, given their generosity, depends on the overall economic health of the societies concerned and, importantly, on the architecture of the SPSs themselves. In academic and government assessments of these systems, it is accepted that certain design features can lead to unexpected behaviour and unintended, or even undesired, outcomes. For example, these can include (i) concentration of employment or unemployment durations at certain programme time points (e.g., when qualification for unemployment insurance (UI) is achieved following a spell of employment, or just before the expiry of benefits), (ii) the support of individuals who are not in need, or (iii) prolonged dependence due to disincentives for labour market participation which are built into the SPS. Poor design features may ultimately compromise the SPS itself.  We are indebted to A. Polycarpou, and C. Stavrakis for their detailed comments and insightful information. We are also indebted to officers in the Ministry of Labour, Welfare and Social Insurance, the Cyprus Statistical Service and the Ministry of Finance for helpful comments or clarifications. An anonymous referee provided valuable editorial comments. Finally, we thank the journal’s editor for her support. All remaining errors are our own. * Corresponding Author. Address: Department of Economics, University of Cyprus, P. O. Box 20537, 1678 Nicosia, Cyprus. Email: louis.christofides@ucy.ac.cy Tel: 22893654. Cyprus Economic Policy Review, Vol. 13, No. 2, pp 3-47 (2019) 1450-4561