The purpose of this paper is to analyze the role of institutional change in economic development. In this study, first the question is answered what changes the institutions in the country have accepted during the last 40 years, then by studying the mountainous region of Rudbar, the role of these institutional changes on the economic development of the region is analyzed. Epistemology governs the study of critical realism, in the sense that there is a world independent of the mind, but that understanding and experience of the outside world do not fully correspond to it. The data required for the research were collected through two methods of documentation and local study. Cochran's formula was used to determine the sample size, based on which 379 households were selected as a sample. The study showed that in the beginning and the first decade of the revolution in society, informal institutions and social beliefs based on humanist views and strengthening beliefs in support of national and social interests prevailed. After the revolution, following the imitative policy of economic adjustment, there was no ground for the expansion of inclusive economic and political institutions. Thus, institutions of personal interest, speculation, and amassing wealth peaked, resulting in the elimination and weakening of productive activities and the expansion of speculation and real estate firms. Therefore, the relationship between institutions and economic development is a two-way relationship, and until positive economic developments in society, one can not expect the existing institutions to change to inclusive and developmental institutions.