Criticisms of endogenous growth models with flat rate taxes have highlighted two features that are not substantiated by the data. These models generally imply: (1) that economic growth must fall with the share of government expenditures in output across countries, and (2) that one-time shifts in...

This paper presents an algorithm to solve recursive systems, formulated in discrete or continuous time, which have an endogenous state variable. The basis of the algorithm is a fixed point equation in the function from the state variables to the control variables.