Capital from the Diaspora, Economy of the Homeland: The Economic Role of the Turkish Diaspora in Turkish Economic History

Developing countries face a persistent financing gap as one of the major obstacles to achieving sustainable development goals. Insufficient domestic savings hinder these countries’ ability to secure the financing required for their growth and development objectives, which consequently renders them dependent on external financial resources. External financing plays a crucial role in enabling these countries to undertake essential investments, raise income levels, and improve overall social welfare. In this context, the economic contributions of diaspora communities to their countries of origin have gained increasing recognition as a viable source of external financing. In recent years, diaspora investments have attracted attention in the development literature not only for their financial value but also for their broader developmental impacts. For many developing countries, diaspora contributions go beyond remittances and include direct investments, entrepreneurial initiatives, and the transfer of knowledge, skills, and cultural values. Migrants are thus viewed not only as financial contributors but also as key development actors who bring valuable human and social capital to their home countries. This study explores the role of diaspora investments as an alternative mechanism for development financing, drawing on key insights from the existing literature. It also examines the case of Türkiye, where, particularly since the 1960s, labor migration to European countries—especially Germany—has played a strategic role in national development through foreign exchange inflows and the transfer of skills and experience. Furthermore, the Granger causality analysis for the period 1964–1980 indicated a bidirectional causal relationship between remittances and the trade deficit, whereas the analysis for the period 1964–2020 did not reveal such a relationship.