This paper presents a model of how political and economic institutions evolve over time, focusing on the persistence of economic institutions despite changes in political institutions. The model considers two groups: landowning elites and workers. The key economic decision involves the form of institutions regulating labor markets, such as competitive markets versus labor repression. The main idea is that equilibrium economic institutions result from the exercise of de jure and de facto political power. A change in political institutions, such as moving from non-democracy to democracy, alters the distribution of de jure political power, but elites can intensify their investments in de facto political power, such as lobbying or the use of paramilitary forces, to offset their loss of de jure power. In the baseline model, equilibrium changes in political institutions have no effect on the stochastic equilibrium distribution of economic institutions, leading to a form of persistence called invariance. When the model is enriched to allow for limits on the exercise of de facto power by elites in democracy or for costs of changing economic institutions, the equilibrium takes the form of a Markov regime-switching process with state dependence. Finally, when changing political institutions is more difficult than altering economic institutions, the model leads to a pattern of captured democracy, where a democratic regime may survive but choose economic institutions favoring the elite. The paper uses historical examples from the U.S. South, Latin America, and Liberia to illustrate these ideas. The model shows that even with frequent changes in political institutions, certain aspects of economic institutions can persist. The paper also discusses how institutional persistence can be diminished or broken, and how effective democracy requires both reforms in specific political institutions and a way to curb the de facto political power of elites. The model provides insights into the experience of many less developed countries, showing how labor repression can persist even after the abolition of systems like the encomienda or slavery. The paper also relates to the literature on the persistence of institutions in political science and discusses how institutional persistence can arise from multiple steady-state equilibria or social conventions. The model extends previous work by considering the process of elites investing in their de facto political power, leading to significant differences in results. The paper concludes that the coexistence of persistence and change in institutions is a key insight, and that effective democracy requires both reforms in political institutions and a way to curb the de facto power of elites.This paper presents a model of how political and economic institutions evolve over time, focusing on the persistence of economic institutions despite changes in political institutions. The model considers two groups: landowning elites and workers. The key economic decision involves the form of institutions regulating labor markets, such as competitive markets versus labor repression. The main idea is that equilibrium economic institutions result from the exercise of de jure and de facto political power. A change in political institutions, such as moving from non-democracy to democracy, alters the distribution of de jure political power, but elites can intensify their investments in de facto political power, such as lobbying or the use of paramilitary forces, to offset their loss of de jure power. In the baseline model, equilibrium changes in political institutions have no effect on the stochastic equilibrium distribution of economic institutions, leading to a form of persistence called invariance. When the model is enriched to allow for limits on the exercise of de facto power by elites in democracy or for costs of changing economic institutions, the equilibrium takes the form of a Markov regime-switching process with state dependence. Finally, when changing political institutions is more difficult than altering economic institutions, the model leads to a pattern of captured democracy, where a democratic regime may survive but choose economic institutions favoring the elite. The paper uses historical examples from the U.S. South, Latin America, and Liberia to illustrate these ideas. The model shows that even with frequent changes in political institutions, certain aspects of economic institutions can persist. The paper also discusses how institutional persistence can be diminished or broken, and how effective democracy requires both reforms in specific political institutions and a way to curb the de facto political power of elites. The model provides insights into the experience of many less developed countries, showing how labor repression can persist even after the abolition of systems like the encomienda or slavery. The paper also relates to the literature on the persistence of institutions in political science and discusses how institutional persistence can arise from multiple steady-state equilibria or social conventions. The model extends previous work by considering the process of elites investing in their de facto political power, leading to significant differences in results. The paper concludes that the coexistence of persistence and change in institutions is a key insight, and that effective democracy requires both reforms in political institutions and a way to curb the de facto power of elites.