Kosovo’s diaspora: a key pillar of the economy
Kosovo’s large diaspora has a remarkable influence on the country’s economy. Diaspora tourism is crucial for Kosovo’s exports. Strong remittance inflows raise household welfare significantly, but weaken work incentives. Diaspora-linked FDI provides much-needed capital and potential knowledge spillovers, but remains heavily concentrated in real estate, limiting productivity gains. At the same time, continued emigration leads to human capital loss. Looking ahead, generational change, evolving forms of diaspora engagement and continued emigration are likely to reshape Kosovo’s relationship with its diaspora.
Introduction
Which Western Balkan economy earns the most from tourism relative to its size? Montenegro? Albania? In fact, it is Kosovo. In 2025, travel-service revenues reached around 29% of GDP – the highest share in the region. The reason is not beaches, ski resorts or cruise ships, but Kosovo’s sizeable diaspora. Every summer, Kosovars living abroad return in large numbers, often for several weeks, spending on restaurants, retail, transport and other services. This makes diaspora tourism a major source of external revenues. And tourism is only one channel: remittances and investment provide additional inflows, while continued emigration affects Kosovo’s labour market. This newsletter looks at the economic role of the diaspora today and how it may evolve.
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The diaspora’s size and economic power
Kosovo’s diaspora is the result of several migration waves: labour migration to Western Europe from the 1960s onwards, subsequent family reunification, large-scale displacement during the 1998–99 war, and continued labour migration in the post-war period.
Today, around half a million Kosovo-born emigrants live abroad, with Germany and Switzerland by far the most important destinations. Wage levels there illustrate the magnitude of the income differential: in 2025, the average monthly gross wage (excl. special transfers) amounted to around EUR 4,850 in Germany and to ca. EUR 8,900 in Switzerland, compared with EUR 713 in Kosovo (both incl. special transfers).
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While Kosovar migrants tend to earn below host-country averages, their incomes remain substantially above those available in Kosovo. The diaspora therefore combines considerable size with markedly higher earning and spending capacity than households at home, providing the basis for its strong economic influence through tourism, remittances and investment.
Diaspora tourism: boosting exports
The diaspora’s higher earning power translates most visibly into tourism spending. Around 95% of Kosovo’s travel-service revenues are attributed to diaspora tourism, making it a major source of external demand for the economy. Spending by visitors constitutes an export of services: income earned abroad is spent on goods and services produced in Kosovo, directly supporting value added and employment in retail, hospitality, transport and other sectors. The initial expenditure can also generate a multiplier effect, as firms and employees spend part of this additional income again domestically.
Remittances: higher welfare, weaker work incentives
Beyond spending during visits, the diaspora supports households through substantial remittance transfers. Inflows have been remarkably stable at around 17% of GDP in recent years. As income that is largely independent of domestic economic conditions, remittances can act as a form of private insurance, allowing households to smooth consumption during income shocks and overcome financial constraints. Their welfare effects are sizeable: according to the World Bank (2024), 41% of households that would have been poor in the absence of remittances were lifted out of poverty.
However, this additional non-labour income can also weaken incentives to work. Remittances may raise recipients’ reservation wage – the lowest wage at which taking up employment becomes worthwhile – and thereby reduce labour supply.
Diaspora FDI: capital inflow, limited productivity gains
The diaspora is also a major source of foreign investment. Fitch (2026) estimates that around 70% of Kosovo’s FDI inflows originate from the diaspora, making emigrants’ savings an important source of external capital. Diaspora investors face lower information and transaction costs than other foreign investors due to their familiarity with Kosovo, personal networks and knowledge of the local market. In principle, diaspora FDI can support growth not only by increasing the capital stock, but also through transfers of technology, managerial know-how and access to foreign business networks.
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However, the extent of these benefits depends crucially on where the capital is invested. In Kosovo, FDI is strongly concentrated in real estate, which accounted for 70% of total inflows in 2025. Property investment supports construction, employment and domestic demand, but typically creates fewer productivity spillovers and contributes less to technological upgrading and export capacity than investment in export-oriented sectors.
Emigration: losing workers, gaining networks
The economic benefits of the diaspora need to be weighed against the effects of the emigration that created it. When workers leave Kosovo, the domestic economy loses human capital. This can become particularly costly when emigrants are young or possess skills that are already scarce at home. The IMF (2025) finds that large-scale emigration is exacerbating skill mismatches in Kosovo, contributing to labour shortages and wage growth that has outpaced productivity and weakened competitiveness.
However, migration does not necessarily imply a permanent loss of human capital. The concept of brain circulation highlights channels through which skills acquired abroad can benefit the country of origin. Migrants may return with additional qualifications, work experience, savings and business know-how, while those remaining abroad can transfer knowledge and facilitate commercial links through professional networks. The World Bank (2024) therefore emphasises return migration, skills transfer and stronger diaspora networks as potential channels through which migration can contribute to Kosovo’s development.
Whether these benefits compensate for continued labour and skill losses will increasingly depend on how Kosovo’s migration patterns and its relationship with the diaspora evolve.
Outlook: how will the diaspora evolve?
Kosovo’s diaspora is likely to evolve in two important ways. As the established diaspora matures, second-generation Kosovars will become more important. Their stronger integration in host countries may gradually change the form of engagement with Kosovo: traditional household transfers could become relatively less important, while investment, entrepreneurship, professional networks and knowledge transfer gain relevance. This would broaden diaspora engagement beyond remittances and increase the importance of brain circulation.
At the same time, continued emigration may replenish the first-generation diaspora. Persistent wage differentials and deeper EU integration could encourage further migration unless accompanied by stronger productivity and wage growth in Kosovo.
Overall, Kosovo’s ability to continue to benefit from its diaspora will increasingly depend on fostering investment, skills-transfer and creating international business networks.
