They don’t always reduce economy but the why is complicated (many factors at play).
Inertia matters when you’re accelerating the vehicle, that costs economy. A larger tire might gear a vehicle to a more efficient operating regime. Compari g two of the same diameter, a tire with a taller sidewall (and smaller wheel) might be lighter and use less energy tocaccelerate than a large wheel amd short sidewall. That larger tire might be an off road model that is softer and has more rolling resistance (the tire flexing absorbs energy and heats the tire). The large tire might be used because it is narrow and aerodynamic (like solar powered racing cars or maximum efficiency competition vehicles use bicycle wheels and tires because they have very very low rolling resistance.
Tire compound, belting, tread pattern, temperature, load sensitivity, surface roughness, roadway material, etc all influence the efficiency too.
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