Political market failure? The effect of government unity on energy technology policy in industrialized democracies

• Government unity increases investment in energy technology in countries characterized by wasteful energy use.
• In industrialized countries, 1980–2006, unified governments invest large amounts of money in energy research and development when the society's energy intensity is high.
• Findings show that coalition politics in the legislature can explain variation in energy technology policy.

When do governments implement technology policies that allow society to solve social problems at a lower cost? Focusing on the case of energy, we argue that in industrialized democracies, severe social problems provoke an effective technology policy response when the government is unified. A unified government can easily strike the bargains required to secure political support for new technology programs. We test this theory against data on public energy research and development (R&D) in 22 OECD countries, 1980–2006. We find that as government fractionalization increases in a country, the sensitivity of public energy R&D to wasteful energy use, which presents economic and environmental difficulties to the society, declines. The analysis reveals a new reason for ineffective technology policies and contributes to the broad literature on political market failure.