Both of them are perfectly okay.
Difference between - the correct and complete idiom is difference between X and Y. In this, both X and Y must be ||. Both X and Y should be of same grammatical structure ( both verbs/ both nouns/ both clauses).
In the example you gave both X - what you can do and Y- what I can do are || ( both are clauses and both begin with what).
Therefore, it would be incorrect to say " there are differences between what you and I can do.
Here "what you" is not || to '"I can do".
This can illustrated through the usage of another idiom -both X and Y.
eg: Both Hary and Loyd have contributed a great deal to the world of art. (Hary and Loyd are ||)- correct
BMW has manufacturing plants in both USA and Germany- correct
BMW has manufacturing plants both in USA and in Germany - correct (see the in repeated)
BMW has manufacturing plants both in USA and Germany - incorrect ( the first is a noun (X) and the second is a preposition (Y))
This rule must be followed in all idioms such as not only X but also Y, not X but Y etc
Differences in- In the sentence that you sent the following items are || - you and I.
Here is why:
There is no such idiom - difference in X and Y.Therefore, you need not make X and Y ||.
When you parse the sentence from left to right, you encounter the word and . The word and is used for 2 purposes: joining independent clauses or connecting items in a list. Here the purpose is to connect 2 items in a list.
Unlike in the idiom difference between X and Y in which what is not distributive ( you have to repeat what in both parts and have to have a verb in both parts), in this case what can be distributed to both parts.
so, in this sentence "There are differences in what you and I can do." you have "you" and "I" || (both of which are nouns). The pronoun what is distributed in both parts.
Alternatively, "There are differences in what you and I can do." = "There are differences in what you and what I can do.".
This is very similar to " The objective of this law is to reduce crime rate and to reduce harm to the economy." = " The objective of this law is to reduce crime rate and reduce harm to the economy."
You have the choice of either repeating to in all items of the list or making it common to all items in the list.
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