The Returns to Physical Capital in Knowledge Production: Evidence from Lab Disasters

Stefano Baruffaldi and Fabian Gaessler

American Economic Journal: Applied Economics, 2026, vol. 18, issue 1, 248-85

Abstract: We investigate the nature and relevance of physical capital in knowledge production. Exploiting adverse events in research laboratories, we find that scientists experience a persistent reduction in research output if they lose specialized physical capital—equipment and material they created over time for a particular research purpose. In contrast, they recover in productivity if they only lose generic physical capital. Scientists in older laboratories, who presumably lose more obsolete physical capital, are more likely to change their research direction and recover. These findings suggest that scientists' investments into their own physical capital yield lasting returns but also create path dependence.

JEL-codes: D24 D83 E22 G31 I23 O31 (search for similar items in EconPapers)
Date: 2026
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DOI: 10.1257/app.20220629

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