The dependence of the imaginary part of the dielectric function on the quantum confinement within two different schemes: intra-atomic and interatomic optical matrix elements are applied and compared. The optical spectra of Si nanowires are studied by means of a semi-empirical sp3s* tight-binding supercell model. The surface dangling bonds are passivated by hydrogen atoms. The results show that although the intra-atomic matrix elements are small in magnitude, the interference between these terms and the interatomic matrix elements contributes with nearly 25% of the total absorption. Thus, a quantitative treatment of nanostructures may not be possible without the inclusion of intra-atomic matrix elements.