  Firms exhibit varying productivity levels even within narrowly defined
industries and face uncertainty when predicting future performance. This paper
investigates the link between productivity uncertainty, heterogeneity, and
misallocation across all inputs. Using a model where heterogeneous firms face
staggered productivity shocks, creating gaps between expected and actual
productivity, I find a positive association between marginal revenue product
dispersions and productivity variability. The analysis reveals that
productivity shocks predominantly drive marginal revenue product dispersions.
By comparing baseline estimates with those from the factor shares approach, I
highlight the limitations of the latter method in analyzing the effects of
productivity evolution.
