4 discounting the distant future a little less heavily.<sup>3</sup> In no area of public action has this role for the state been active longer than in mandatory savings for retirement, through contributory old‐age pensions.

The combination of mandating long‐term savings (even for expected retirement periods) and insuring against uncertainty (say, that a person’s retirement period may be unexpectedly long) would already make devising a good social insurance system a complex mechanism design problem. Adding systematic inter‐personal redistribution complicates things even more, because of the obvious tension between the redistribution motive and the needed incentives for saving for one’s own retirement. Finally, the nature of both social insurance and social assistance instruments affects the consequences of various individual decisions on the margin – in areas as diverse as labor supply, job search intensity, propensity for private savings, family formation, etc. The optimal design of these instruments should in principle take into account not only their likely benefits in terms of reduced income volatility, inequality and poverty, but also the likely efficiency costs.<sup>4</sup> Understanding the interactions between the two components of the social protection system, even while distinguishing between them conceptually, is an important – and challenging – part of this complex public action design problem.

This paper focuses on _social assistance_ programs in Latin America and the Caribbean (LAC): those designed primarily to reduce poverty and deprivation. We look briefly at the evolution of these programs since their inception, about a century ago, but concentrate primarily on the dramatic expansion in and transformation of Latin America’s social assistance portfolio in the last two decades. In so doing, we pay special attention to four basic types of programs: (i) _in‐kind transfers_ (particularly food programs); (ii) _workfare programs;_ (iii) _noncontributory social insurance schemes_ (such as social pensions); and (iv) _conditional cash transfers (CCTs)_ .<sup>5</sup> The chapter summarizes how each of these programs works, their achievements, and limitations. While a number of programs do share similarities across countries, the considerable heterogeneity of social and economic conditions throughout Latin

> 3 See, e.g. Thaler and Sunstein (2009).

> 4 Some social protection policies may also lead to efficiency _gains_ , of course. One example is their possible protective effect on the human capital of the poor. See, e.g. World Bank (2006).

> 5 Two of these program types are good examples of the blurred boundaries between social assistance and social insurance. Workfare is typically intended as a temporary source of income for workers hit by negative employment shocks, and is thus very close to a social insurance motive. However, this “poor man’s unemployment insurance” is generally designed to self‐target to the poorest among the unemployed, by means of low wage rates and, sometimes, burdensome or unpleasant work. They are also often motivated explicitly as anti‐poverty programs. These ‘targeted’ features justify the inclusion of workfare under social assistance. As for “non‐contributory social insurance”, the very name suggests that these are intended as social insurance substitutes for those excluded from the mainstream, contributory system. They are usually targeted specifically at the poor, or at those who work(ed) in sectors where the poor dominate, such as agriculture.