I might agree with expensive/inexpensive but who says US developers are more skilled than others? On what grounds, study, statistics can anyone claim that?
In my own experience, I've managed outsourced teams in China, Mexico, India and Argentina. While doing so, I've worked with some fabulous developers and also many not-so-fabulous developers. I've also hired more than my share of engineers in the US and the fabulous:not-so-fabulous ratio actually ended up being pretty similar.
The main thing that local developers have in their favor is they get to partake in the evolution of thought that takes place in any long term product strategy whereas remote developers don't have that advantage without the help of enlightened managers / dev teams.
The really good developers, however, wherever they are, are able to transcend even that challenge and contribute effectively to the product strategy. I've seen that happen in remote teams in all of the above countries and it's pretty cool to watch.
Yep, that's it. It's not that the people are all that different. It's that a person twelve time zones away is a lot harder to communicate with than a person living next door. Especially if they're not from the same culture.
The cultural and distance barriers aren't impossible to overcome. But they are a handicap.
I used to work for a semiconductor company with a substantial factory in Malaysia. I'll never forget the first time I took the long, long flight to meet the engineers there. It was like removing a blindfold. You got into the factory with those folks and suddenly all their problems -- which had seemed so obscure over those damned conference calls -- became clear, and their personalities snapped into place, and you could start getting things done.
OTOH I worked with a Ukrainian outsourcer that had very talented, well schooled, professional, and productive developers. They were also fairly expensive at $40/hour. Good, but not much cheaper.
Your $40 number seems grounded in reality though. I've never worked in the outsourcing business, but Ravi claims about $40 is what you need to pay for a good coder. [http://ravimohan.blogspot.com/2007/05/faq-from-my-mail-box-1...].
I would suggest it's more that the highly skilled developers in, say, India are not cheap enough to make the outsourcing worth it. Here's a WSJ article making that argument:
http://online.wsj.com/article/SB118342455118256110.html
"Last year, Mr. Shah paid his engineers in India about half of Silicon Valley levels. By early this year, it was 75%."