In 1926 an economist called George Taylor introduced a theory that is called the hemline index. This theory says that hemlines on women’s dresses fluctuate with the economy, measured by stock prices or gross domestic product. When the economy is flourishing, hemlines increase, meaning one would see more miniskirts, and when the economic situation is deteriorating the hemlines drop, perhaps even to the floor.
Urban legend has it that the hemline is correlated with the economy. In times of decline, the hemline moves towards the floor – decreases – and when the economy is booming, skirts get shorter and the hemline increases. Monthly data has been collected on the hemline, for 1921-2009, and evaluate these against The National Bureau of Economic Research’s (NBER) chronology of the economic cycle. The main finding is that the urban legend holds true but with a time lag of about three years. Hence, the current economic crisis predicts ankle length shirts around 2011 and 2012.
The Erasmus School of Economics measured the hemlines of skirts appearing in French fashion magazines every month since 1921. And found that there is a link between hemlines and the state of the US economy, as measured by NBER’s chronology of recessions. But there’s a lag of three years: recessions lead to skirts to getting longer in three years’ time. By contrast, skirt lengths have no predictive ability for the state of the economy.
Of course, Taylor’s theory was based upon American hemlines, not French ones. But it is unlikely that there is a lag of three years from the former to the latter. If anything – with France having been the fashion capital of the world for many years – there’d be a lag from French hemlines to American ones, which is undermines Taylor‘s theory even more.
Based on the analysis of actual data on the hemline, which goes back to January 1921, data shows that the hemline-length fluctuates about every three years. Supporting the urban legend, it is obvious that poor economic times make the hemlines to decrease, which means that women’s dresses get lower, and that prosperity is correlated with a reduced hemline – more miniskirts. At the same time, and this is new to the available evidence, since there is a time lag of around three years. This explains why in an economic downturn, the skirts can be short, as this is simply due to the fact that the economy was in a boom.
The reverse relation has also been analysed, that is, whether the hemline had any impact on the NBER chronology, this time using a logit model. Reassuringly, no such relation has been found to exist, not a current one, nor that there are any lagged effects.
So, apparently bankers have no reason – other than those shared by some men – to like short skirts, and no reason to fear the apparent lengthening of them.