This paper studies the optimal taxation of top labor incomes. Top income earners are modeled as managers who operate a span of control technology as in Rosen (1982). Managers are heterogeneous in their talent. Effort and talent of the manager are privately observed. Managerial talent increases...

We use a firm-CEO assignment framework to model the market for CEO effective labor. In the model's equilibrium more talented CEOs match with and supply more effort to larger firms. Taxation of CEO incomes affects the equilibrium pricing of CEO effective labor and, hence, spills over and affects...