Elite capture[1] is a form of corruption whereby public resources are biased for the benefit of a few individuals of superior social status in detriment to the welfare of the larger population. Elites are groups of individuals who, because of self-ratifying factors such as social class, asset ownership, religious affiliations, political power, historic discrimination among social groups, political party affiliation, or economic position, have decision-making power in processes of public concern. This specific form of corruption occurs when elites use public funds, originally intended to be invested in services that benefit the larger population, to fund projects that would only benefit them. This form of corruption is differentiated from outright criminal corruption such as embezzlement, misappropriation, or other diversion of funds by a public official.
Elite capture is related to information asymmetry, inefficient regulation or inefficient allocation of resources. This causes a siphoning of resources by elite middlemen through legal practices such as noncompetitive tender of contracts, excessive pricing and overcharging, which reduce the proportion of a government project's budget being spent on the declared mission. This causes a biased distribution of a public good or a service, resulting a situation wherein certain segments of the population experience reduced access to these public goods. In this context, as long as there is elite capture, the welfare impact will not be Pareto Optimal nor equitable.[2]
