Good afternoon,
I am running a few GSEM regressions at the firm-level, wanting to check whether x1, x2, x3, x4 have a positive effect on y, a binary variable.
x1, x2, x3, x4 and y are likely to be affected by the firm's sector (four sector categories, 2000 firms)

Therefore, I believe I have two options:
1. using sector as a control variable,
Code:
gsem ( i.sector x1 x2 x3 x4-> y, logit ), vce(robust)
2. using a latent control variable which varies at the sector level to add a random effect for sector to both y and x1, x2, x3, x4

Code:
gsem ( M[sector] x1 x2 x3 x4-> y, logit ) ( M[sector]-> x1 x2 x3 x4), vce(robust)
I am not exactly sure about how "option 2" works: the sector coefficient is set to 1 by STATA by default, so you cannot discuss how different sectors impact on y, and I am not sure on how this latent variable impacts on the relationship between x and y (standard errors I guess?).

Can you please give me a piece of advice on which of the two options better applies to my case, and how to interpret the results in "option 2"?

Thank you very much!