(This version: January 1998)

We estimate the effects of export sector growth on GDP growth using a panel data set for 31 developing countries between 1960-1990. The two sector model we use contains three specific channels through which exports can impact GDP growth: a) a productivity differential between the export and non-export sectors, b) technological spillovers and c) by alleviating a (potentially) binding foreign exchange constraint thus allowing for the import of intermediate goods. By applying a generalized method of moments procedure we address the three main flaws in previous work on this topic: endogeneity of the regressors, the existence of correlated fixed effects and measurement error in the explanatory variables. We find that the productivity differential and the technological spillover effects have a positive and significant impact on GDP growth but that the foreign exchange constraint is not binding.