Social infrastructure and the investment rate. Suppose that rates of return to capital are equalized across countries because the world is an open economy, and suppose that all countries are on their balanced growth paths. Assume the production function looks like Y = IKaL1-a, where I refl ects differences in social infrastructure.

(a) Show that differences in I across countries do not lead to differences in investment rates.

(b) How might social infrastructure in general still explain differences in investment rates?