The United States is not producing enough college graduates in science, technology, engineering, and mathematics (STEM) fields (Kuenzi, Matthews, & Mangan, 2006; Chen & Weko, 2009). By 2025, there will be over three million STEM jobs to be filled in the United States and more than two million may remain unoccupied (Giffi et al., 2018). This study explores how undergraduate STEM degree production is influenced by state higher education STEM policies, and uses a microeconomic conceptual model rooted in two theories derived from economics and political science: principal agent theory and production function theory. Panel data over a 17-year time period from all 50 states were analyzed to address two questions:

1. How is undergraduate STEM degree production within a state related to state economic and higher education finance variables?

2. Controlling for state economic and higher education finance variables, how are states’ undergraduate STEM degree production influenced by state higher education STEM policies?

The study found that state undergraduate enrollment per full-time equivalent (FTE) and state expenditures for need-based aid per undergraduate FTE influence state STEM degree production. Different time lag models were used to analyze the effect of state STEM policies.

Two variables representing state STEM policies, incentives for STEM and articulation agreements in STEM influence STEM bachelor’s degree production in a state when no time lag is applied. Three variables representing state STEM policies (i.e., incentives, articulation agreements, and scholarships), however, influence STEM degree production in a state when lagged by five years.

Results from this study contribute to both literature and policy. The conceptual model combines two theories to higher education literature providing a useful framework for analyzing the effects of various state actions on STEM degree production. Potential policy implications also emerged: 1) policy-focused research can inform stakeholders and the public of what are the influencers of STEM degree production and the impact of policy on STEM degree production; 2) data can be used to drive policy development focused on meeting state completion objectives and economic goals; and 3) understanding what drives policy adoption is useful context for states looking to affect STEM policy development.