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 more attractive and with a higher wage. Henceforth, a sustained equilibrium with different wage rates across different areas can happen .
Read more about this topic: Compensating Differential
Famous quotes containing the words geographical and/or wage:
“While you are divided from us by geographical lines, which are imaginary, and by a language which is not the same, you have not come to an alien people or land. In the realm of the heart, in the domain of the mind, there are no geographical lines dividing the nations.”
—Anna Howard Shaw (1847–1919)
“By bourgeoisie is meant the class of modern capitalists, owners of the means of social production and employers of wage labor. By proletariat, the class of modern wage laborers who, having no means of production of their own, are reduced to selling their labor power in order to live.”
—Friedrich Engels (1820–1895)