A compensating differential is mainly a cause of a difference in:

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A compensating differential is a difference in wages that compensates workers for differences in working conditions. For example, workers in dangerous jobs may be paid more than workers in less risky jobs in order to compensate for the increased danger. Differences in human capital and productivity may also contribute to wage differences, but they are not specifically related to compensating differentials.

A Compensating Differential Is Mainly a Cause of a Difference