Human Capital and Technological Transition: Insights from the U.S

This paper explores the effects of human capital on workers during the latter 19th century by examining the specific case of the U.S. Navy. During this time, naval officers belonged either to a regular or an engineer corps and had tasks assigned for their specialized training and experience. To test the effects of specialized skills on career performance, we compile educational data from original-source Naval Academy records for the graduating classes of 1858 to 1905. We merge these with career data extracted from official Navy registers for the years 1859 to 1907. This compilation comprises one of the longest and earliest longitudinal records of labor market earnings, education and experience of which we are aware. Our results suggest that wage premia for “engineer-skilled ” officers rapidly deteriorated over their careers; more traditionally skilled officers were better compensated and promoted more frequently as their careers progressed. This compelled those with engineering skills to leave the service early, contributing to the Navy’s failure to keep up with the technological frontier of the time