EGR lowers the specific heat ratio of the combustion stroke gasses. This drops the efficiency of the diesel cycle.
you can see what sort of effect this has by changing g here
The Diesel Engine
(note just plug one nubmer in and the rest will be set to their defaults)
for pure air g would be equal to 1.4 . Typically combustion gases with excess air are about 1.35 . Combustion gases with no excess air are about 1.3 .
However adding EGR if employed in just the right amount at just the right amount for a specific fuel mass injected and a specific rpm can better approximate the idea diesel cycle. This will increase efficiency some. The trick is getting just that right amount.
Now days EGR is mainly just used for NOx control.