There's a fair amount of research that suggests that the FFA (fusiform face area, where we supposedly process faces) is really just specialized for processing objects that we're very familiar with. For example, bird-watchers' FFAs light up more when they're differentiating between birds, and I think they have increased repetition suppression too.

Anyway, the theory behind that research is that we process faces differently because we're all very familiar with them, so it would make a lot of sense if this other-race effect is purely because Western Caucasians see Western Caucasian faces more and East Asians see East Asian faces more.

I'd like to see the study done with people who are living in a country where their race is a tiny minority.