st: ivreg2 warning but ALL statistics are reported

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

Reposting the question as the old text seemed a bit unclear.

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 (regions) 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 left me with only 3 regressors (1 endogenous
instrumented by 3 excluded) for 26 clusters (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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