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.