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compensating differential
Wage differential is a term used in labour economics to analyze the relation between the wage rate and the unpleasantness, risk, or other undesirable attributes of a particular job. A compensating differential, which is also called a compensating wage differential or an equalizing difference, is defined as the additional amount of income that a given worker must be offered in order to motivate them to accept a given undesirable job, relative to other jobs that worker could perform. One can also speak of the compensating differential for an especially desirable job, or one that provides special benefits, but in this case the differential would be ''negative'': that is, a given worker would be willing to accept a ''lower'' wage for an especially desirable job, relative to other jobs.
The idea of compensating differentials has been used to analyze issues such as the risk of future unemployment, the risk of injury, the risk of unsafe sex, the monetary value workers place on their own lives, and in explaining geographical wage differentials.
== Geographical Wage Differentials==
There is a wide literature dealing with geographical wage differentials. Following the neoclassical assumption of clearing labour markets, where there is a more attractive area to live in and if labour mobility is perfect, then more and more workers will move to this area which in turn will increase the supply of labour in this area and in turn depress wages. If the attractiveness of that area compared to other areas do not change, the wage rate will be set at such a rate that workers would be indifferent between living in areas that are more attractive but with a lower wage and living in areas which are less attractive and with a higher wage. Henceforth, a sustained equilibrium with different wage rates across different areas can happen.〔
抄文引用元・出典: フリー百科事典『 ウィキペディア（Wikipedia）』
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