Division of labour and economic interdependence in india
Answers
Answer:
Economic interdependence is a consequenceof specialization or the division of labor. The participants in any economic system must belong to a trading network to obtain the products they cannot produce efficiently for themselves. Any change in such a network affects many participants, so that the demands for various products and the incomes of the participants are interdependent. As A. A. Cournot wrote in Mathematical Researches into the theory of Wealth "...the economic system is a whole in which all of the parts are connected and react on one another. An increase in the income of the producers of commodity A will affect the demand for commodities B, C, etc. and the incomes of their producers, and by their reaction will affect the demand for commodity A." [1] Such complex reactions are evident in general equilibrium theory.
The economic interdependence of nations has been studied extensively by professors all around the world. Such an international economic interaction is commonly thought of as a dollar value of the transaction of goods and services between nations (Cooper);[2]several academics have challenged this fundamental paradigm over time. Baldwin suggests that economic interdependence may be conceived as the opportunity costsincurred from potential exit costs that incur as a result of breaking existing economic ties between nations. Whitman, cited by Baldwin, further expands on Cooper's definition and proposes that economic interdependence should also involve the degree of sensitivity of a country’s economic behaviour to policies and development of countries outside its border. However, empirical evidence to support the latter definition is a lot harder to find, given its ambiguity (Baldwin).