Performance Funding Policy Impacts on STEM Degree Attainment

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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