Why Does the Matthew Effect Exist?

What is the Matthew Effect?

The Matthew Effect refers to the phenomenon where "the rich get richer, and the poor get poorer" or "those who have more will be given more, while those who have little will lose even what they have." The term comes from a parable in the Bible (Matthew 25:29): "For to everyone who has, more will be given, and he will have abundance; but from him who does not have, even what he has will be taken away." Coincidentally, a similar idea appears in Laozi’s Dao De Jing (Chapter 77): "The way of Heaven is to take from the excess and give to the deficient. The way of man is the opposite—to take from the deficient and give to the excess."

From an economic perspective, the Matthew Effect is straightforward: resources or capital flow to where returns are highest. Scarcity drives up prices, so wealth naturally concentrates around scarce resources.

Examples

1. National Level: Prime Real Estate in Core Cities
   Where is property most expensive in a country? The answer is core cities. What defines a core city? Examples:

   • Beijing (capital, cultural & political center);

   • Shanghai (financial hub);

   • Guangzhou (commercial hub, "Millennium Merchant City"), though Hangzhou has emerged as a competitor due to Alibaba’s rise;

   • Shenzhen (tech & innovation center).
     
     These cities become cores because critical resources concentrate there.

2. Urban Level: Prime Locations in a City
   Where is property most expensive in a city? Prime locations. These areas are supported by two key factors:

   • Superior amenities (transportation, healthcare, schools);

   • Desirable landscapes (e.g., riverfront views, parks).
     For instance, homes near subway stations or top-tier schools command higher prices due to resource accumulation.

How the Matthew Effect Manifests
Resource concentration in core areas means:

• During market downturns, prime properties resist price declines better;

• During upturns, they appreciate faster.

Thus, the most resilient and appreciating properties are in prime locations of core cities. For homeowners, upgrading from non-core to core assets aligns with the Matthew Effect’s economic logic. Those holding multiple non-core properties should consider selling and reinvesting in prime real estate.