The amount of money given to Palestinians is closely correlated with the number of murders committed by Palestinians.
Rubicon3 links to an article with a graph that illustrates the correlation between aid and murders. Murder is defined as numbers of people (both Israeli and Palestinian) killed by Palestinian militants. The article makes no pretense about a causal relationship:
These statistics do not mean that foreign aid causes violence; but they do raise questions about the effectiveness of using foreign donations to promote moderation and combat terrorism. The graphs reveal that the increased budgetary aid to the Palestinian government after the start of the second Intifada in September 2000 was accompanied by a corresponding increase in the number of Palestinian homicides in 2001 and 2002. After mid-2002, Israeli counter-measures against suicide bombers began to reduce the number of Israeli dead. By August 2003, the first portion of the security barrier was in place, leading to a rapid decline in homicides in 2003. While Israeli counter-measures reduced the number of Israeli victims, factional violence increased the number of Palestinian victims. Thecorrelation between increased aid and violence thus continued.
In that article there's a link to another article with a graph showing the reverse correlation between aid and the GDP of the Palestinian economy.
While it is not proven that the aid played a direct role in causing the economy to decline, clearly the increasing aid was unable to improve the Palestinian economic situation absent improvements in the political situation. Yet aid to the Palestinians has only increased. 2006 saw record levels of foreign aid and continued deterioration of the Palestinian economy. 2007 promises far greater aid. The increased aid may yet prove successful where past aid failed, but only because of better linkage to promoting political change. A recent announcement by the Palestinian government to reduce security forces by more than 30,000 is a welcome step in the right direction.
The assessments of none other than George Abed, a Palestinian and senior IMF economist, and of James Prince, a consultant to the Palestinian Investment Fund, offer an important summary of the phenomenon of increased aid correlating with economic deterioration. Abed recognized the futility of providing donor aid, asserting that it was counterproductive. What was needed, he said, was investment. This view was echoed in Prince's conclusion that, "many of the donor programs have not only been ineffective, they have harmed the economy."