The notion of interdependence originates back to Adam Smith's
The Wealth of Nations, where he suggests that 'a general plenty' may diffuse through all ranks of society through means of specialisation and the
division of labour.
Economic interdependence, as defined by the Oxford Dictionary of Archaeology (2 ed.), is based on the concept that ‘in the division of labour, individuals depend on others to produce all or most of the goods they need to sustain their lives'. Whilst such economic interaction is commonly thought of as a dollar value of the transaction of goods and services between nations (Cooper), several academics have challenged this fundamental paradigm over time. Baldwin suggests that economic interdependence may be conceived as the
opportunity costs incurred 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).