TY - JOUR AU - Broner,Fernando A. AU - Martin,Alberto AU - Ventura,Jaume TI - Enforcement Problems and Secondary Markets JF - National Bureau of Economic Research Working Paper Series VL - No. 13559 PY - 2007 Y2 - October 2007 UR - http://www.nber.org/papers/w13559 L1 - http://www.nber.org/papers/w13559.pdf N1 - Author contact info: Fernando Broner CREI and Universitat Pompeu Fabra Ramon Trias Fargas, 25-27 08005 Barcelona Spain Tel: +34-935422601 Fax: +34-935421860 E-Mail: fbroner@crei.cat Alberto Martin CREI Universitat Pompeu Fabra Ramon Trias Fargas, 25-27 08005 Barcelona Spain E-Mail: amartin@crei.cat Jaume Ventura CREI Universitat Pompeu Fabra Ramon Trias Fargas, 25-27 08005-Barcelona SPAIN Tel: +34 93 542 1765 Fax: +34 93 542 1860 E-Mail: jventura@crei.cat AB - There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general conclusion is that weak enforcement institutions impair the workings of these markets, giving rise to various inefficiencies. But weak enforcement institutions also create incentives to develop secondary markets, in which the assets issued in primary markets are retraded. This paper shows that trading in secondary markets counteracts the effects of weak enforcement institutions and, in the absence of further frictions, restores efficiency. ER -