st: ivreg2 warning but ALL statistics are reported

[Umid Aliev <U.Aliev@leeds.ac.uk>]

Dear Stata users,

In my work on estimating wage equation using cross-sectional data. I am using
ivreg2 command for 2-step GMM. Since the data is cross-regional I am tryig to
use cluster-robust standard errors. I have 26 clusters and 70 regressors
(including industry and regional dummies). To avoid the problem of having
weighting matrix to be rank deficient I partialled out industrial and regional
dummies (which are also used to define clusters), which left me with only 3
regressors (1 endogenous instrumented by 3 excluded) for 26 regions.
Nevertheless I got the warning message-

> warning - estimated covariance matrix of moment conditions not of full rank.
> overidentification statistic not reported, and standard errors and model
> tests should be interpreted with caution.
>
> possible causes -  number of clusters insufficient to calculate robust
> covariance matrix singleton dummy variable (dummy with one 1 and N-1 0s or
> vice versa) partial option may address problem.

Overidentification test Hansen J statistic is reported contrary to what is
stated in the warning message. The only statistic missing is Stock-Wright LM S
statistic.

I am slightly confused on how to treat these results. Are they valid? or does
the appearance of warning suggest that further work needs to be done?

Many thanks,
Umid

Umid Aliev
Leeds University Business School
Maurice Keyworth Building
Leeds

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