# Is this steady state assumption right?

**URL:** <https://forum.dynare.org/t/is-this-steady-state-assumption-right/18479>\
**Category:** SMM/GMM/IRF-Matching\
**Created:** [6 July 2021 01:44 UTC](https://forum.dynare.org/t/is-this-steady-state-assumption-right/18479 "2021-07-06T01:44:26Z")\
**Posts on this page:** 2\
**Page:** 1

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**Author:** ![dsge\_modeling](https://forum.dynare.org/letter_avatar_proxy/v4/letter/d/9de053/32.png) [@dsge\_modeling](https://forum.dynare.org/u/dsge_modeling)\
**Post date:** [6 July 2021 01:44 UTC](https://forum.dynare.org/t/is-this-steady-state-assumption-right/18479/1 "2021-07-06T01:44:26Z")

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Sometimes we set the average TFP such that output is normalized to 1 in steady state (i.e. y=af(\cdot) s.t. y=1). Nonetheless in my model, the labor endowment is also normalized to 1 (i.e. unemp. + out\;of\;labor + labor=L=1), is that right? Thanks!!

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**Author:** ![jpfeifer](https://forum.dynare.org/user_avatar/forum.dynare.org/jpfeifer/32/5044_2.png) [@jpfeifer](https://forum.dynare.org/u/jpfeifer)\
**Post date:** [6 July 2021 07:01 UTC](https://forum.dynare.org/t/is-this-steady-state-assumption-right/18479/2 "2021-07-06T07:01:21Z")

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Typically, you can assume both. The a is the necessary constant to allow scaling y while the utility function is usually written down in a way that requires a normalization of labor as well, e.g. \ln(1-n\_t)