Dov,

I agree with the general approach of collecting facts and building a thesis. Still, I have a few remarks.

Let's not base an analysis of israeli arabs on the tiny sample that includes their top politicians (say, 100 persons?) and the ideological terrorists (perhaps a few dozens inside the green line). For meaningful results, we need more robust statistical facts.

Second, when trying to judge the relevance of economic factors to violent events, the time scale you use is perhaps too short. It is not simply that in a year when there is 5% rise in GDP there is 20% less terror. These processes develop over a long time scale of decades.

As a first shot, here is my understanding of the relationship between economics and violence:
When a group of people feel that they are so miserable that they have nothing to lose, or, at the other extreme, so strong they cannot possibly lose - then there is danger of widespread violence.

According to this line of thought, if Israeli arabs are constantly aware of what they have to lose, violence will not erupt.