Vibrating wheel hub puller - GIF

[tonyfoale]

Heating the outer component would make it expand (in all directions) making its internal diameter smaller thereby binding even tighter.

Heating the inner component (again expanding in all directions) would increase its outer diameter thereby binding even tighter.

Does anyone have a logical explanation of which is better?

Heating the outer component makes it expand as you say but its inner diameter expands away from the centre not towards it. If the hole expanded inward and the outside expanded outward as you propose then there would have to be a ring between those two extremes that did not expand. This is not the reality.

Imagine the circumference of the hole, if that circumference expanded then its diameter also has to expand not close up.

Imagine the hub as being a set of concentric rings, each ring will expand such that inner and outer diameters will expand outward, therefore the whole object will expand outward.

So you need to heat the outer part.

I recall asking my school teacher a similar question close to 70 years ago. He was unable to provide an answer.