Economic Incentives Have Little Effect on Palestinian Attitudes Toward Israel

Of course it has little effect. Palestinians don't want peace, they want victimhood and Jewish blood helps them achieve that. From BitterLemons.org:

Since 1967 virtually all Israeli governments have implemented a broad spectrum of economic carrots and sticks with the objective of manipulating the Palestinian political will - with little or no effect on the overall attitude of Palestinians toward Israelis and the conflict.

Since 1994, the international community has invested huge sums in developing a Palestinian infrastructure and security services and propping up the governing bureaucracy of the PA. But the benefits for the political process are at best debatable.

Indeed, arguably the huge sums of international aid showered upon the Palestinian leadership over the past decade and a half have been an important factor in generating the corruption that caused Palestinians to install a Hamas leadership two years ago.

To be sure, economic prosperity is as good for Palestinians as it is for everyone else. But there is no positive and demonstrable cause-and-effect connection between prosperity and a reduction in the inclination to engage in terrorism: witness the outbreak of the second intifada in 2000 at a time of relative Palestinian economic prosperity.