average of about 0. 5 – 1. 0 % over the same period. in other words, on the face of it at least, there is evidence of the financial sector having undergone something of a “ productivity miracle ” during this century. this pattern has not been specific to the uk. measured tfp growth in the financial sector exceeded that of the whole economy across many developed countries between 1995 – 2007, a trend that accelerated in the “ bubble ” years of 2003 – 2007 ( chart 11 ). ( b ) returns to factors of production tfp in a growth framework is no more than an accounting residual. it provides no explanation of the measured productivity “ miracle ” in finance. a related question is whether the observed productivity miracle was reflected in returns to the factors of production in finance. chart 12 decomposes total gva of financial corporations into income flowing to labour ( defined to include employees only ) and income flowing to capital. broadly speaking, the rise in gva is equally split between the returns to labour ( employee compensation ) and to capital ( gross operating surplus ). the miracle has been reflected in the returns to both labour and capital, if not in the quantities of these factors employed. for labour, these high returns are evident both in cross - section and time - series data. chart 13 shows average weekly earnings across a range of sectors in the uk in 2007. financial intermediation is at the top of the table, with weekly average earnings roughly double those of the whole - economy median. this differential widened during this century, broadly mirroring the accumulation of leverage within the financial sector ( chart 14 ). the time - series evidence is in some respects even more dramatic. philippon and reshef ( 2009 ) have undertaken a careful study of “ excess ” wages in the us financial industry since the start of the previous century, relative to a benchmark wage. chart 15 plots their measure of excess wages. this shows a dramatic spike upwards which commenced in the early 1980s, but which exploded from the 1990s onwards. the only equivalent wage spike was in the run - up to the great crash in 1929. philippon and reshef attribute both of these wage spikes to financial deregulation. this picture is broadly mirrored when turning from returns to labour to returns to capital. in the 1950s gross profitability of the financial sector relative to capital employed was broadly in line with the rest of the economy ( chart 16 ). but since then, and in particular over the past decade, returns

and non - financial returns rising and falling roughly in lockstep. but from then until 2007, cumulative returns to finance took off and exploded in a bubble - like fashion. only latterly, with the onset of the crisis, has that bubble burst and returned to earth. ( b ) measuring gva in the financial sector to begin to understand these trends, it is important first to assess how financial sector valueadded is currently measured and the problems this poses when gauging the sector ’ s contribution to the broader economy. most sectors charge explicitly for the products or services they provide and are charged explicitly for the inputs they purchase. this allows the value - added of each sector to be measured more or less directly. for example, gross output of a second - hand car dealer can be calculated as the cash value of all cars sold. the value added of that dealer would then be estimated by subtracting its intermediate consumption ( the value of cars bought ) from gross output. this is also the case for some of the services provided by the financial sector. 1 for example, investment banks charge explicit fees when they advise clients on a merger or acquisition. fees or commissions are also levied on underwriting the issuance of securities and for the market - making activities undertaken for clients. but such direct charges account for only part of the financial system ’ s total revenues. finance – and commercial banking in particular – relies heavily on interest flows as a means of payment for the services they provide. banks charge an interest rate margin to capture these intermediation services. to measure the value of financial services embedded in interest rate margins, the concept of fisim – financial intermediation services indirectly measured – has been developed internationally. the concept itself was introduced in the 1993 update of the united nations system of national accounts ( sna ). the sna recognises that financial intermediaries for further details refer to, for example, akritidis l ( 2007 ). provide services to consumers, businesses, governments and the rest of the world for which explicit charges are not made. in associated guidelines, a number of such services are identified including : taking, managing and transferring deposits ; providing flexible payment mechanisms such as debit cards ; making loans or other investments ; and offering financial advice or other business services. fisim is estimated for loans and deposits only. the calculation is based on the difference between the effective rates of interest ( payable and receivable ) and a “ reference ” rate of interest