“…2 However, the theory of compensating wage differentials predicts that wages adjust according to the cost of living and amenities of a location (Rosen, 1979;Haurin, 1980;Roback, 1982;Blomquist et al, 1988;Graves et al, 1999). Other evidence suggests that wages are adjusted to fully compensate workers for the cost of living in a location (Aggarwal and Kenny, 1996;Kenny and Denslow, 1980). This leads one to ask whether the retention of military personnel is significantly affected by the rigid pay structure, which fails to fully adjust wages for the local labor market where personnel are assigned.…”