In an environment populated by ex-ante identical agents, institutions (the “rules of the game”) are set to maximize payoffs of those individuals in power. They are constrained by the threat of rebellion, where the rebels would be similarly constrained by further threats. Equilibrium institutions are the fixed point of this constrained maximization problem. With the possibility of private investment and the threat of government expropriation, power is shared among a larger group of people. Endogenously, this enables the group in power to act as government committed to protection of property rights, which would otherwise be time inconsistent. But since sharing power implies sharing rents, capital taxation is inefficiently high.