This paper uses data from the American Association of University Professors annual salary survey to compute continuation rates for associate professors at American colleges and universities during the 1996-97 to 2001-2002 period. Findings demonstrate that average continuation rates are higher for private academic institutions than for public academic institutions in bachelors-level, masters-level and doctoral-level institutions. Multivariate analyses indicate that the average level of faculty compensation at an institution is an important predictor of the continuation rate. All other things held equal, institutions with higher average faculty compensation have higher continuation rates. However, the magnitude of this relationship is not sufficiently large enough to warrant change in compensation policies at academic institutions, particularly between public and private institutions. The benefits associated with raising average faculty compensation to increase the tenured faculty’s continuation rates at public universities are unlikely to match or exceed the costs of doing so.