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Abstract

Performance funding policies for higher education allocate appropriations to public institutions based on student outcomes such as degree completions. This study investigates whether a special science, technology, engineering, and mathematics (STEM) incentive in 13 state performance funding policies leads to greater undergraduate degree completions in STEM fields. This study applies a conceptual framework of principal–agent theory and anticipatory policy effects. Incorporating a panel data set on 551 public 4-year institutions from 2003-2004 to 2014-2015, results from difference-in-differences analyses suggest that the STEM incentive increases total STEM bachelor’s degrees completed as well as STEM bachelor’s degrees completed as a proportion of all bachelor’s degrees. Findings are robust to alternative specifications, suggesting that institutions are responding to the performance funding STEM incentive by graduating more students in these high-demand fields.

Keywords

performance funding STEM higher education finance policy principal–agent anticipatory changes difference-in-difference

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Performance Funding Policy Impacts on STEM Degree Attainment

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Keywords

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