Europe faces slowing growth, ageing populations, and structural shifts. This column discusses how organisational economics can illuminate the impact of structural forces on Europe and assist in the design of policies to promote productivity and growth. Demographic change is among the most consequential challenges for European governments, and its impact hinges on organisational choices regarding hiring, training, and retention. Furthermore, AI has the potential to fuel growth, but it also requires a strategy for implementation, both at the institutional level and within organisations. Further work is needed to understand how organisational structures and managerial choices shape policy outcomes.
In a context of slowing growth and rapid technological change, societies are experiencing increasing unrest and social malaise, with populism on the rise. Significant structural changes (technological, demographic, geopolitical) lie ahead, and designing better policies and institutions is essential to navigate them successfully. The effectiveness of a policy — and its distributional consequences — depends crucially on how firms respond (Azmat et al. 2024). Similarly, the implementation and impact of policies depend on the organisational structures behind them, particularly government bureaucracies and their incentives. Organisational economics studies precisely these mechanisms, analysing how organisational structures and incentive systems shape individual and collective behaviour, and how these behaviours affect economic outcomes (Gibbons and Roberts 2013).
With this perspective in mind, in the most recent Organisational Economics workshop at Bocconi (the IMO ESF Conference) we organised a panel with three European economists closely involved in policy design. The panellists were: Clémence Lenoir, macroeconomic and public policy advisor to the French President; Juan Francisco Jimeno, Chair of the Spanish Productivity Board; and Monika Schnitzer, Head of the German Council of Economic Advisors. They presented the most important challenges facing their governments and discussed how organisational economics can illuminate both the impact of structural forces and the design of policies that promote productivity and growth. Three broad themes emerged.
Beyond the birth rate: Adapting the workplace to an ageing Europe
The panellists highlighted that demographic change is among the most consequential challenges that European governments are grappling with. For example, the relative abundance of older versus younger workers reduces the career prospects of the young, labour mobility, and therefore human capital accumulation, incentives for innovation, and productivity. But they pointed out that the realised impact depends on organisational adaptation. This places strong demands on HR departments to rethink their policies within the regulatory context they face: how long to retain workers, when to offer early retirement, how to adjust recruiting and non-monetary benefits (including work from home policies) in a context of competition for young workers, how to foster collaboration in diverse workforces, and how to use AI in all of these. Productivity outcomes hinge on firms’ organisational choices regarding task allocation, promotion and decision-making systems, team design, and knowledge transfer.
Immigration is often viewed as a corrective to demographic decline, but its effectiveness also depends on firm-level organisational practices. Integrating foreign workers requires managerial strategies that address heterogeneity in culture, norms, and communication. Success depends on how well firms design contracts, monitoring systems, and cultural integration practices.
Consequently, governments considering retirement rules, re-training programmes, immigration policies, and labour regulations can design more effective policies by explicitly accounting for firms’ responses and needs. This also requires more theoretical and empirical work from the academic side to understand and assess how organisations can effectively deal with these challenges.
Solving the productivity paradox: AI is only as smart as the organisation that deploys it
All three panellists highlighted the game-changing role of AI. AI’s potential is undeniable, yet adoption has been slow and productivity gains uneven. From an organisational economics perspective, this is unsurprising: technology alone does not induce productivity gains. This requires complementary changes in organisational structure, incentives, managerial practices, and strategic decisions to manage the transformation (Milgrom and Roberts 1990, Bresnahan et al. 2002). The panellists highlighted that the adoption of AI requires itself a strategy, both at the institutional level and within organisations. The risk is a scattered development that does not create synergies, but duplication of efforts, lack of general-purpose tools and practices, and, last but not least, harmful developments of the technology that could be productivity-neutral or even counterproductive at a societal level — such as attention-capturing applications (think social media, which is strongly suspected to reduce productivity and even reduce children’s IQ) or rent-extractive algorithms that reallocate surplus without creating efficiency gains.
Organisational barriers to AI adoption — coordination frictions, misaligned incentives, and limited managerial capacity — highlight the need to link technological change to organisational design and decision-making. AI also reshapes the demand for managerial skills, increasing the value of adaptive, technology-complementary capabilities while reducing the need for routine management. The panellists observed how these challenges are particularly salient for SMEs, where managerial capacity and access to business education may be limited. This interacts with demographic challenges, as older cohorts of managers may face adjustment costs, and it directly impacts the potential for growth (Garicano 2025).
Regulations and schemes that consider these dynamics are more likely to support effective adoption and a faster transition path for the economy. This is as important for governments as for employer associations and unions negotiating agreements and contracts as well as upskilling and training programmes.
The state as an organisation: Applying organisational economic insights to bureaucracy
Even when there is consensus on what reforms are needed, implementation often lags behind. The Draghi Report (2024) on Europe’s productivity challenge illustrates this gap: despite broad agreement on problems and needed actions, implementation is slow. Organisational economics can help explain why: bureaucracies are complex organisations whose performance depends on internal incentives, information flows, and coordination across units (Olken 2007, Finan et al. 2017). Bottlenecks often arise from misaligned incentives, hierarchical frictions, and inadequate mechanisms to process and act on information.
Policy effectiveness is therefore as much a matter of legislative ambition as of organisational design within the state. Theory and evidence on how to best reform European decision making and implementation bodies to increase agility were something the experts from all countries thought were lacking.
Conclusion
Across demographics, AI, and policy implementation, the common thread from the three speakers was clear: organisational structures and managerial choices will critically shape policy outcomes.
They therefore joined us in making a call to steer scholarly research in organisational economics toward critical policy questions. On the one hand, this involves building on existing studies and amplifying their insights through the policy lens emphasised by our panellists and the productivity challenges outlined in the Draghi (2024) report. However, we also need new research focused on solving today’s most urgent policy problems.
Therefore, we believe that better incorporating how organisations function and make decisions in response to their environment can offer new perspectives in traditional fields that directly study public policy. This will not only push the research frontier but also inform policy and enrich our understanding of society. Just as the academic community joined forces across fields to address the pandemic, we should do the same in this slower burn crisis, as the challenges are equally daunting.
Source : VOXeu
