Recruitment of Seemingly Overeducated Personnel: Insider-Outsider Effects on Fair Employee Selection Practices

We analyze a standard employee selection model given two institutional constraints: First, professional experience perfectly substitutes insufficient formal education for insiders while this substitution is imperfect for outsiders. Second, in the latter case the respective substitution rate increases with the advertised minimum educational requirement. Optimal selection implies that the expected level of formal education is higher for outsider than for insider recruits. Moreover, this difference in educational attainments increases with lower optimal minimum educational job requirements. Investigating data of a large US public employer confirms both of the above theoretical implications. Generally, the econometric model exhibits a �good fit�.