US economists James Heckman and Daniel McFadden have been awarded the Nobel prize for economics, the Royal Swedish Academy of Sciences said.

The two economists will share a prize worth nearly $1m.

They were praised for developing theories on how people work and live, which contributed to changes in wage analysis, transport and communication systems.

The Nobel Prize for Economics was only established in 1968, unlike the others which were founded in 1901. The prize is sponsored by the Bank of Sweden.

Awarding the prize to the two economists highlights a shift in the academy's approach, following the award of the prize to India's Amartya Sen for his contributions to welfare economics two years ago.

That shift has led to a greater recognition of the role of government in shaping economic life, both through its role in regulation and institution-building and through its investment in human capital through education.

Work and life

The questions the two economists sought to answer were how do people choose where to live, how long to study, how much to work and how far to travel.

Mr McFadden's work paved the way for an economic theory which shows how individuals choose where they work and live.

This led to the development of the San Franscisco BART transport system and investments in phone services and housing for the elderly.

The citation noted that "a recurring theme in McFadden's research is his ability to combine economic theory, statistical methods and empirical applications where his ultimate goal has often been a desire to resolve social problems."

Mr Heckman's research showed a correlation between education and wages.

"With the help of Heckman's models, you can figure out what effects one year of education will have on wages and one can study the differences in wages between men and women given a certain education and age," Karl Gustav Joereskog, a member of the academy said.

Mr Heckman, 56, is a professor of economics at the University of Chicago in Illinois, while Mr McFadden, 63, holds the E. Morris Cox Chair in Economics at the University of California, Berkeley.